CVS Health (NYSE: CVS) announced Wednesday it’s buying senior-focused, multi-payer value-based primary care company Oak Street Health (NYSE: OSH) for $10.6 billion.
The acquisition gives CVS – parent company of Aetna – a stronger foothold in primary care while furthering its all-around value-based care strategy. Moving forward, the Woonsocket, Rhode Island-based CVS will be tasked with figuring out exactly how to utilize Oak Street as part of its evolving approach to behavioral health care.
The Chicago-based Oak Street Health screens all of its patients for mental health and substance use disorder conditions via its collaborative care model. Meanwhile, CVS has invested millions of dollars into Array Behavioral Health Care while rolling out mental health-focused initiatives such as its recently launched CVS Health Community Equity Alliance.
CVS’ pending purchase of Signify Health likewise will give it additional insight into the behavioral health needs of Aetna members in the home setting.
“We are making significant progress advancing our strategy, which includes expanding our care delivery and health services capabilities in primary care, home health and provider enablement,” CVS Health President and CEO Karen Lynch said during a Wednesday morning conference call on the company’s fourth-quarter financial results.
Under terms of the all-cash transaction, CVS is acquiring Oak Street for $39 per share. The deal is expected to close in 2023, pending regulatory review.
Founded in 2012, Oak Street Health is a network of value-based primary care clinics that serve adults on Medicare. As of Wednesday, the company had 169 centers in 21 states, with over 159,000 at-risk patients receiving care. Oak Street Health also delivers primary care services in the home.
“[Oak Street’s] innovative care model goes beyond typical primary care to provide patients with comprehensive preventative care to support overall health and well-being,” Lynch continued. “Our unparalleled consumer touch points will expand Oak Street’s reach, and it will allow them to engage with more consumers more frequently and more conveniently.”
While Oak Street is focused on serving adults and the Medicare population, CVS ultimately plans to leverage its model alongside the health care retailer’s established care delivery assets, including its more than 1,100 retail health MinuteClinics.
The goal, Lynch explained, is to boost CVS’ preventive care and chronic care management power. That is sure to include staying ahead of behavioral health-related exacerbations.
“The potential across CVS Health’s base of assets is powerful,” Lynch said. “Together, we will transform the experience for consumers across the country.
Additionally, from a financial standpoint, the acquisition of Oak Street Health will help CVS grow its Medicare efforts while continuing work with other payers.
“After a thorough and robust review of the market, Oak Street was the primary care asset that proved to be the most strategically and financially compelling,” CVS CFO Shawn Guertin said during the company’s Q4 earnings call. “Oak Street will operate as a payer-agnostic business within CVS Health focused on improving outcomes and experiences for the Medicare populations it serves. CVS Health has a strong and proven track record of helping its payer clients succeed, and we will continue to prioritize that success after this transaction.”
Oak Street’s behavioral health background
By 2026, Oak Street Health is projected to have over 300 centers. The company is currently helmed by CEO Mike Pykosz, who will continue to lead Oak Street once it becomes part of CVS’ recently formed health care delivery organization.
“By joining CVS Health’s ecosystem, we will accelerate our journey to improve patient outcomes and experiences while continuing to invest in both our innovative care model and … in what we believe is the best team in health care,” Pykosz said during Wednesday’s call.
Broadly, the integration of primary care and behavioral health services has the potential to save the U.S. health care system tens of billions of dollars each year – something Oak Street’s team has seen first-hand.
In the past, Oak Street Health leaders have told Behavioral Health Business that almost half of the patients it screens through its collaborative care model are at-risk of experiencing a behavioral health-related health care problem.
That screening allows the company to take action.
“From there, there’s proactive enrollment with a qualified mental health professional that is on-site and an embedded part of the care team, assisting both with diagnostics and treatment,” Katherine Suberlak, vice president of clinical services at Oak Street Health, said during Aging Media Network’s Continuum conference in December. “Then we have a virtual team of over 10 psychiatric providers that cover the network. So when escalation is necessary, they can help build out that triad around the patient of the primary care provider, psychiatrist and the qualified mental health professional.”
Rates of behavioral health conditions in older adults have increased since the COVID-19 pandemic. More than a quarter of adults ages 65 to 74 report feelings of anxiety or depression, according to a Kaiser Family Foundation report.
Similar to Oak Street, CVS has also focused on caring for a patient’s physical and mental wellbeing.
It has a track record of integrating behavioral health into primary care services. For example, the company’s new virtual primary care offering also includes on-demand mental health services.
“We, as a health services organization, are committed to treat people’s mental health and physical health collectively,” Cara McNulty, president of behavioral health and mental wellbeing at CVS Health, previously told BHB. “Your head is connected to your heart, your heart is connected to your head and that is the premise we go with.”
CVS reported total revenues of $83.8 billion for the fourth quarter of 2022, up 9.5%
compared to the previous year. The company’s full-year revenues were $322.5 billion, up 10.4% compared to the previous year.
